The "wealth management industry" has divided the rich into four grades. At the top are the super-rich, the thousand wealthiest people in the country. The Sunday Times Rich List says to qualify for inclusion you must have assets of £60m, and each year the bar is raised higher. There are 54 billionaires in Britain; of these, 20 have come from overseas. Next, are the ultra high-net-worth individuals-those with a clear £6.6m, not counting their homes. Below that come the high-net-worth people, with £660,000, and finally at the bottom are the "mass affluent"-individuals who have at least £150,000 to invest over and above the value of their homes.
These classifications are interesting, but they don't tell the whole story. There are many misconceptions about the rich. They need to be challenged, because they have such a profound influence on public attitudes and government policy.
The most obvious is the assumption that the rich are all the same. In reality, there are different types of rich people; just as there are different grades of wealth. Some have inherited their wealth; others have made a fortune through their own endeavours. I know people who have never done a day's work, and people whose visionary concepts and entrepreneurial drive have helped to change the world. Some seek to make more millions because they enjoy the thrill of the chase; for them, money is simply a way of "keeping the score". Others use the power of wealth to influence events, to make things happen. Some are stingy and some are generous; many give millions to charity.
There is a widespread tendency to confuse wealth with income. Wealth is what we accumulate, not what we earn and spend. Many of the people who display a high-consumption lifestyle have few investments and other income-producing assets.
The numbers so often quoted in the press are also deceptive because they tend to ignore taxes and debts. What counts is net worth-the sum of all one's assets minus liabilities. If you borrow a lot of money you could even be on the minus side. Some alleged multi-millionaires have relatively modest net worth because they owe so much.
Another factor is that the figures are usually based on assets that fluctuate in value, such as shares and property, or which are hard to pin down, like land and art treasures. They are ultimately worth only what others are willing to pay for them.
There is an enduring myth that all wealth is accumulated by exploitation-that if someone gains, someone else loses. This may be true of the stock market, or horse racing, or a poker game but it is certainly not true of most everyday transactions. If I buy a new suit, or a new car, it is a voluntary act; I enter into it in the full knowledge that the retailer expects to make a profit. I don't mind, because I want those things and am willing to pay for them. We may argue about the price, but both of us gain something by the exchange.
The wealth of people such as Sir Philip Green or Sir Richard Branson does not diminish my wealth or anyone else's. The money they spend on luxuries is theirs, not mine.
Society is not enriched by reducing everyone to the lowest common denominator. It is hard to see any reason for that kind of strategy, or for abusive terms like "stinking rich" and "filthy rich", other than envy or the flaunting of moral superiority. The aim, surely, must be to level up rather than down-to encourage people to create wealth, and enjoy its benefits, rather than to improve equality by government decree.
Egalitarians often appeal to an undefined, and undefinable, notion of "social justice". They argue that the rich should be taxed more heavily "because they are not paying their fair share". But they don't specify how one knows what a fair share would be, and they don't question why so much of the revenue collected by the state is used to maintain a bloated bureaucracy. What does that have to do with social justice?
Sir Winston Churchill famously said that "for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle". Older readers of Director will recall that a previous Labour government attempted to do just that, with dire consequences. Denis Healey, the chancellor of the day, said he would make the rich "howl with anguish". He later claimed to have been misquoted, but he imposed confiscatory levels of taxation. The economy did not improve-indeed, the UK went from one crisis to another. Poverty did not disappear, and unemployment rose. Many rich people left the country. Others decided that there was no point in working hard, and taking risks, if the Treasury were going to grab up to 97 per cent of their income.
Margaret Thatcher changed all this. Tax cuts and the privatisation of state-owned entities transformed the economy. Her "entrepreneurial revolution" made many of us feel that, with real effort, we stood a good chance of getting rich. Thousands of people, including me, launched their own businesses.
Socialists still maintain that the "Thatcher years" were all about greed. There was certainly an element of that, but the charge is unjust.
The present Labour government accepts the need for an enterprise culture. Tony Blair has often denounced "the snobbery shown to people who make money". In one of his speeches he pledged to "tear down the barriers to upward mobility" and help to change "the unhealthy public attitude to self-made businessmen and women". He said that, looking back, there was "something fundamentally wrong" about our culture: "The old right-wing élite regarded entrepreneurs as beneath them. The left regarded them as anti-social. When we should have been hugely proud of our successful entrepreneurs we tended simply to wait until they fell flat on their face and if possible helped them to do it."
Gordon Brown says he wants the UK to be more like the US-a country that has always encouraged the belief that there is nothing wrong with being rich, or trying to get rich. He is, at heart, Old Labour, but he is also a realist who understands the importance of wealth creation.
Immigrants, especially from Asia, play a significant role in this. The Department of Trade and Industry estimates that there are more than 250,000 "ethnic minority" businesses, and that they contribute £15bn a year to the economy. Many of these hard-working people have made a fortune and could easily afford to leave. The UK would be a poorer country without them.
The same goes for the many foreigners who work in the City. It is a myth that London's financial district is run by greedy Brits. Foreign banks nowadays play the dominant role. It is largely due to them that the City has managed to retain its reputation as one of the world's leading financial centres. They have introduced new ideas as well as capital, and they have helped to demolish the old class structure. When I first worked there, in the 1950s, it was like a cosy club. The aristocrats have since been replaced by international meritocrats who expect to be judged by performance, not by their social standing.
The most vehement public criticism still tends to be aimed at the alleged "fat cats"-the chief executives of large corporations. The irony is that few qualify for inclusion on the "rich lists". They have an impressive income, on which they pay tax, but generally don't stay at the top long enough to accumulate serious wealth.
There is, today, less envy of entrepreneurs, and we don't object if pop stars, footballers, and other "famous" celebrities make millions. We don't call them fat cats.
It is an old cliché that "money doesn't buy happiness". The expression tends to be used most often by people who reckon they have little chance of getting rich unless they hit the jackpot in the National Lottery. They console themselves with the thought that the rich are miserable. It is a ridiculous assumption. Some are unhappy but not because they are loaded. There are other reasons: poor health, troublesome relationships, the inability to come to terms with the fact that they are not immortal.
The dichotomy between wealth and happiness is entirely false. Life is what individuals make it, and always has been. The truth is that many of the people who show such public disdain for wealth are hypocrites. They would like to be rich but are not prepared to make the necessary effort to get there. This is why so many gamble-in betting shops, on the lottery, on television, and on the internet. It is the dream of instant, easy wealth that makes the National Lottery so popular. Launched in 1994, it has created more than 1,800 millionaires to date. I don't begrudge them their winnings, but are they more "deserving" than those of us who choose to do it the hard way?
People who start their own business, as I did, work long hours and take considerable risks. There is a high failure rate. But entrepreneurs like to be independent, and if they succeed there is a real sense of achievement as well as financial reward.
I realise that not everyone wants to be an entrepreneur. It is perfectly feasible to lead a good life working for someone else. Money is not the only yardstick of success. Many people are engaged in activities that may not be lucrative but which provide personal satisfaction and enrich others in the process-doctors, teachers and scientists are obvious examples.
I also accept that the pursuit of wealth has its ugly side. There is nothing admirable about financial scams or drug dealing. Avarice is unattractive and crime of any sort is unforgivable. But I strongly defend the right of individuals to make a fortune within the framework of the law.
One of the great merits of liberal capitalism is its ability to change and adapt without destroying the basic freedom that most of us regard as vitally important. The Soviet Union collapsed because communism was a dismal failure. The same will eventually happen [to communisim] in China.
Our own country has been transformed to an extent that seemed utopian 100 or even 50 years ago. The Industrial Revolution brought Britain great wealth and power, but it also brought smokestack industries that polluted the air and rivers. The landscape was disfigured by numerous factories and mills, and cities were blanketed in fog. Waste was dumped without any thought of the consequences. Capitalism no longer functions in that way. We now have an unprecedented range of laws designed to protect the environment, and business leaders accept that they have new and wider responsibilities.
David Cameron has sought to distance the Conservative party from "Thatcherism". Yet she won three general elections. More can and should be done, but the UK has prospered because private enterprise has created the wealth that politicians are so eager to distribute.
William Davis is a former financial editor of the Evening Standard and the Guardian. He edited Punch between 1969 and 1977 and was a long-time presenter of The Money Programme on BBC 2. He was founding editor of the British Airways in-flight magazine High Life and has served on the boards of Express Newspapers, Thomas Cook and Allied Leisure.
The Rich is published by Icon.
